There’s nothing wrong with hiring folks from the competition
It’s just, when you do, you’ll overlook too many of their weakness, and give them too much credit for their competitive experience
Only hire them if you still would if they worked somewhere else
— Jason BeKind Lemkin (@jasonlk) January 26, 2021
The time will come when you are first tempted to hire someone from your competitor. They must know so many things we don’t. Have so many skills. It’s pretty tempting. People will tell you about the risks in litigation, trade secrets, etc. I don’t think any of those are necessarily a big deal or a showstopper if you do it right — and if the ROI is there. But let me tell you – it usually isn’t.
Hiring from your Competitor. It may sound great. But it’s usually not really worth it. At least not from one
We try to focus on positive things here on SaaStr. We leave negative to the critics. It’s easy to be a critic. It’s much harder to help and see the good in things. The goal of SaaStr is to point out some things that work and save you some pain.
However, I answered a question on Quora a ways back about mistakes made starting a company. I thought updating that list would create a useful checklist for things not to do in SaaS in the early days … since they are all avoidable.
We survived them, obviously — and ultimately thrived. But I could have done even better knowing what I know now.
So just don’t do the following 10 things in your first 12-24 months or so
My Top 10 Mistakes Starting An (Ultimately Successful) SaaS Company
Recently, I met with a sales leader I’ve known for years, and he told me The Most Curious Story. His SaaS CEO asked him to stop selling so much.
Slow down. You are doing too good of a job, the CEO said. We can’t afford it.
Now … how could this be? Well, it does make sense, when you understand the scenario, a combination of two things:
First, this SaaS company has a mix of freemium customers and sales-driven customers (with higher ACV, lower churn). The freemium ones really have no acquisition costs at this point (the main lead source is mini-brand). The sales-driven customers are very profitable on a CAC basis, since their lead cost is $0, and so the ‘Magic Number’ or CAC/CLTV ratio is very favorable. But … still … the sales team’s commissions consume cash in the
A little while back, I gave a great SaaS Founder CEO a Gift.
A real gift.
This founder CEO was at about $1m in ARR, doing well, but with only a smidge of angel funding and limited resources.
And I gave him an insanely great VP of Sales candidate. An amazing fit for his company, his target ACV, his lead velocity and structure.
And let’s be clear: the CEO was incredibly lucky to get this candidate. Not because the company wasn’t a great, cool company. But because the company wasn’t really big enough, funded enough, with enough going on to really attract a candidate of his caliber (at that time).
But like any candidate, this VP of Sales wasn’t perfect. He was an up-and-coming candidate and had the full package, but it was his first time to really own it all.
The CEO saw it … almost. He hemmed and hawed.
As you try to hire up for your SaaS company, you’re going to be faced with a lot of choices and trade-offs. No hire is the perfect package. Do you take a risk on someone a little more junior than you’d like? Someone from a company a little larger than you’d like? Someone from a very different industry?
I don’t have all the answers here.
But there’s one thing I can tell you in SaaS, at least: Almost Everything Except the Product Itself is Sort of the Same at a Given ACV (Annual Contract Value) Level.
By that I mean:
We’ve talked a lot about hiring a VP, Sales. It’s just such a critical accelerate-or-decelerate decision for a post-Initial Traction SaaS company. We’ve talked about the 48 Different Types of VP Sales, What a VP Sales Really Does, and a Script to Use When Interviewing a VP Sales.
But even armed with all that, I’ve gotta admit, I’ve helped several friends hire a VP Sales recently and even with that we have barely batted .500
In those cases, no “big mistake” hire was made. But still, some hires didn’t work out. It took me a while to figure out why. In one case, one of the investors thought it was just too early, too hard to get a great VP Sales — in this case, at a $6m in ARR, growing 100% YoY, kick-arse SaaS company. To that, I say — Rubbish. Joining a medium-hot SaaS start-up with
One thing that is great in SaaS, from a 20,000 foot perspective at least, is You Can See The Future.
It’s the benefit of a recurring revenue stream in a B2B model. If you did $100k last month, and have grown 6% a month each month for the last 12 mos, I can pretty much say you’ll be a $2m+ ARR business in the next twelve months or so.
The thing is, sales is variant, and sales pipelines have big data quality issues — and worse, sales as a metric is a lagging indicator. In fact, your monthly sales tell you about the past. Pipelines are cr*p for predicting the future. Pipeline for This Month is useful, but still dependent on how various reps get probability right. Pipeline for Next Quarter is almost useless for most SaaS start-ups, even once you get pretty big. And actual sales are
One of the most important operating metrics in your SaaS start-up, if you aren’t predictably cash-flow positive, is your Zero Cash Date (“ZCD”).
You hear a lot about SaaS metrics, but this one doesn’t often come up. It should, and should be very near the top of the list of core metrics.
Your Zero Cash Date is the most likely date, at your current spend/burn, that you will run out of cash.
Many start-ups don’t track this religiously, or with 100% certainty, and just as importantly, don’t always share it with every single one of your investors — and your employees.
I didn’t track it as carefully in my first start-up, but it was the #1 metric for my first investor in Adobe Sign / EchoSign. For good reason. Once I tracked it super-carefully, I found it super-helpful. It aligned everyone in the company, and all the investors (including F&F),
– has something better to do – wants to see how it goes – has a clear backup plan – sees it as risky – argues over who should be CEO – doesn't 100% believe
— Jason BeKind Lemkin (@jasonlk) July 18, 2020
As we’ve talked about before, the great thing about SaaS, is it compounds. Once you have something, it builds on itself. But it takes time. It takes 7-10 years to build something real.
If you are reading this, you’re probably up for that 7-10+ year commitment, assuming you’re fortune enough to get there.
>> But what about your prospective co-founders?
Are you all sufficiently committed enough to make it in SaaS, over the extended term? You guys can talk about it. And say all the right things.
Here’s the thing: do you know for sure? As Mark Suster recently wrote,
In theory, many things can kill a SaaS startup after $4m-$5m ARR
In practice, quitting is the only thing
In theory, many things can stop a SaaS startup after $4m-$5m ARR from getting to $100m
In practice, high churn is the only thing
— Jason BeKind Lemkin (@jasonlk) January 17, 2021
Part of my job when I invest in a start-up is to get folks excited about the company. It’s not that hard. Because I am genuinely excited. Or I wouldn’t make the investment. And part of the picture I try to paint for the The Next Investor is where they’ll be in 12-18 months.
E.g., “Well, MaestroQA is at $5m ARR and has grown 14.20309% a month for the past 5 months and is completely changing the way a $50 billion market does …” [numbers not actual, just for the sample anecdote].
If the growth is there, the